How Nursing Home Costs Can Be Covered By Medicaid in New York

This entry was posted on September 14, 2015

There are three main ways that nursing home costs can be paid.

  • You can pay privately with your own life savings.
  • You can pay with long-term care insurance to the extent of your coverage.
  • Medicaid can pay for the cost of care.

Medicaid assistance comes in different forms. It is helpful to understand that home care Medicaid, PACE, and Assisted Living Medicaid are very different from nursing home Medicaid. Home care and PACE Medicaid work well if you need extra help with medical expenses but wish to remain in your own home. The rules and requirements to become eligible for community Medicaid (home care Medicaid) are different than for long-term care nursing home Medicaid, especially when it comes to making transfers and gifting assets to others. These rules and requirements can be confusing for some, so it is important to get legal guidance from an attorney who practices extensively in the Medicaid field.

If you choose to pay privately, you may still need long-term care Medicaid to pay for your care if you run out of your life savings.

If you have long-term care insurance and you don't have unlimited life time coverage, then after your policy coverage runs out you may have to pay privately with your own life savings. Once your life savings is depleted then you will need to apply for long-term care Medicaid to pay for your care.

Medicaid for Nursing Home Costs

Three basic rules to know regarding how nursing home costs can be covered by Medicaid in New York

In order to qualify for long-term care Medicaid to pay for your care in a nursing home, there are three basic rules:

  1. Your life savings, including stocks and bonds, checking and savings accounts, certificates of deposit accounts, and real property other than your primary residence, must be depleted down to the Medicaid eligibility level for a single person which for 2015 was $14,850. This is known as an asset limit. For married couples, the at home spouse (community spouse) is entitled to keep the primary residence and between $74,820 and $119,220, depending on the couple's total life savings.
  2. You cannot have gifted or transferred your life savings away during the past five years (called the five-year look-back period) to deliberately reduce your life savings down to the $14,850. Unfortunately this may even include charitable donations. There are important exceptions to these transfer prohibitions, so if you have made transfers, it is important to meet with an attorney to learn if any exceptions may apply.
  3. You have a medical need to be in a nursing home.

Asset Protection - Advance Planning

You have options for protecting some or all of your life savings from being depleted down to $14,850 for a single person and still qualify for long-term care Medicaid. There are also income contribution rules in addition to the life savings or asset limits. You will only be allowed to keep $50 of your monthly income for personal needs.

Qualifying for Medicaid can be frustrating and complicated. If you apply for Medicaid on your own and the application is denied, information that you may have unnecessarily provided could hurt you in subsequent applications. Therefore, it is critical to avoid missteps when applying for Medicaid. There are important strategies when applying for Medicaid to consider. Because of this, it is advisable to get legal guidance before applying for Medicaid to minimize the possibility of your application being denied and causing you to lose part of your life savings that could have been protected.Get more information about Medicaid eligibility here.

Medicaid will review all of your asset records in depth for the period of five years before you apply for nursing home Medicaid coverage. For certain assets that have been gifted during this five year period, Medicaid calculates a penalty period, or a number of months or years in which they will force you to pay out of your own pocket for the full cost of your nursing home stay. This is calculated using a formula which takes into account the total amount of assets that you transferred or gifted, using a Medicaid regional rate.

If you are able to plan in advance, by either purchasing comprehensive long-term care insurance or by setting up an Irrevocable Medicaid Trust at least 5 years before you need to apply for Medicaid for nursing home care, you stand the best chance of protecting your life savings. Long-term care insurance may not be an option if you are already ill or if the premiums are too high. Establishing an irrevocable trust may be the better option in many circumstances.

An irrevocable trust is an agreement between you and your trustee. An asset titled in the name of the Irrevocable Medicaid Trust is then owned by the trust. You can reserve the right to change the beneficiaries of your trust. You can also reserve the right to receive all income earned by the trust. Income can include interest, dividends and net rent. Get more details about long-term care insurance and irrevocable trust here.

Asset protection and last minute planning to protect some of your life savings and qualify for Medicaid to cover nursing home costs in New York

If you are already ill and are not able to plan in advance because you don't have five years available to you before entering a nursing home, there is something you can do.

Depending on your situation, you may be able to gift or transfer life savings to special people such as your spouse or a child who is disabled without any transfer penalty. You may be able to protect some of your life savings by purchasing an annuity or setting up a promissory note. Only certain annuities will be protected from long-term care Medicaid costs, and it is vital to obtain expert legal advice on the purchase of a valid annuity. A promissory note with a promise to pay back a specific amount of principal and interest over an agreed upon time period, could also protect some of your assets.

Assets could be saved if your spouse signs a statement called a "spousal refusal." The spousal refusal states that the non-applying spouse will not contribute any of his/her income (above a certain limit) or assets toward the applying spouse's medical needs. In some cases, a spousal refusal can be critical in determining how nursing home costs can be covered by Medicaid in New York. The risk of a spousal refusal is that the Medicaid Agency can file a court recovery action against the at-home spouse (community spouse) to force spousal contribution. One advantage of obtaining immediate Medicaid eligibility with a "spousal refusal" is that the ill spouse will receive nursing home care at the lower "Medicaid Rate" rather than the "Private Pay" rate. To discuss if a spousal refusal is right for your situation, contact us for a free initial consultation.

There are also special rules for the family business, life estates, joint assets, and retirement accounts. A life estate is an interest in real property that exists only during your lifetime. There are important issues to review when deciding whether to transfer property and whether to reserve a life estate:

  • Right to use property for your life
  • Medicaid transfer penalty
  • Life estate value for Medicaid eligibility rules
  • Medicaid treatment of income producing property
  • Medicaid estate recovery
  • Capital gains tax consequences
  • Gift and estate tax consequences

There are many advantages and disadvantages to transferring property to other people with the reservation of a life estate.

Another option that offers even more advantages is titling the property into a specially designed Irrevocable Trust.

There are some assets you are allowed to keep even when on Medicaid such as:

  • your primary residence if you have a spouse living there;
  • personal property and household belongings;
  • one motor vehicle;
  • a life insurance policy with a face value up to $1,500;
  • irrevocable burial agreements.

Free form penalties

Transferring your residence and other life savings to certain qualified individuals or Trusts may also be possible without any penalty at all. The Medicaid law is very complex and should be discussed with an attorney who is experienced in handling Medicaid cases. For more information about some of these options, read about options for protecting assets after illness.

Non-lawyers who attempt to assist with the Medicaid application process do not have all of the tools and resources to protect those savings nor do they know all of the different options that may be available to you, specifically.

Protect your assets by working with Koldin Law Center, P.C. We practice extensively in elder law, estate planning and Medicaid planning. We devote our time, energy and practice to the highly individualized aspects of this process.

At the Koldin Law Center, P.C., with offices in Syracuse and Rochester, New York, we have more 50 years of experience helping elderly individuals plan for immediate crisis and long-term care. Our firm represents clients in Onondaga and Monroe counties and throughout all of upstate New York. The strength of Koldin Law Center, P.C., is in our ability to help you navigate the channels of protecting your home and life savings and paying for nursing home costs using Medicaid. With a former Medicaid case worker and former Chief Attorney for Onondaga County Department of Social Services on staff, the Koldin Law Center, P.C., is ready to assist you in planning to protect your assets and handling the Medicaid application process.

Contact us today for personalized legal assistance on how nursing home costs can be covered by Medicaid in New York.